1. Field of the Invention
The present invention relates generally to a system and method for performing financial transactions with cards and more particularly relates to a system and method for performing financial transactions with integrated circuit cards using a pre-authorized amount.
2. Background of the Invention
With the advancement of the computer industry, the use of payment cards, such as magnetic stripe cards and smart cards, has become the preferred method of transacting business. Using such payment cards simplifies the purchase of goods and/or services by avoiding the necessity of using hard currency for such transactions. Facilitating the use of these payment cards are electronic payment or card accepting terminals, such as credit card reading terminals.
Nonetheless, today in many markets a substantial portion of the population does not have a payment card or even a bank account. In some cases this is due to potential account holders' lack of credit history, exceeding risk profiles or simply lack of transportation to bank branches. This un-banked or under-banked segment has the possibility to be converted into low risk accounts and grown over time into a profitable cardholder base.
In recent years, an electronic wallet system has been suggested in which a monetary amount can be exchanged by communication between integrated circuit (“IC”) cards or between an IC card and a point of sale (“POS”) terminal. The IC card used for this system includes a microprocessor having a communication function and a memory such as electrically erasable programmable read-only memory (“EEPROM”) for storing a processing program, such as the MONDEX™ electronic cash application developed by Mondex International, Ltd. The processing program is capable of configuring the IC card to function as a credit card, a debit card or an electronic cash card.
If configured to function as a cash card, the IC card can be used for offline commercial transactions of merchandises, commodities and the like, and to allow information or data representing a monetary amount to be stored in a memory incorporated in the IC card. However, when the IC card runs out of electronic cash, the cardholder must deposit additional cash onto the IC card using a specialized terminal.
If configured as a credit card or a debit card, information of the monetary amount involved in the transaction is transferred to a POS, which initiates an authorization request for an eventual authorization or denial from a payment card issuing agency. Whether the IC card is configured as a credit card or a debit card, the cardholder must have a credit account or a bank account, respectively, known by the issuing agency in order to use the IC card.
By examining the limitations of the current POS payment solutions and analyzing the likely future demands, it is preferable to provide a more flexible, configurable and controllable method for enabling a certain portion of the population having no credit history, a bad credit history or no bank account to utilize an IC card payment system.